Correlation Between STRAYER EDUCATION and Steadfast Group

Can any of the company-specific risk be diversified away by investing in both STRAYER EDUCATION and Steadfast Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining STRAYER EDUCATION and Steadfast Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STRAYER EDUCATION and Steadfast Group Limited, you can compare the effects of market volatilities on STRAYER EDUCATION and Steadfast Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in STRAYER EDUCATION with a short position of Steadfast Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRAYER EDUCATION and Steadfast Group.

Diversification Opportunities for STRAYER EDUCATION and Steadfast Group

0.7

Correlation Coefficient

STRAYER EDUCATION  Steadfast Group

Poor diversification

The 3 months correlation between STRAYER and Steadfast is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding STRAYER EDUCATION and Steadfast Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steadfast Group and STRAYER EDUCATION is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on STRAYER EDUCATION are associated (or correlated) with Steadfast Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steadfast Group has no effect on the direction of STRAYER EDUCATION i.e., STRAYER EDUCATION and Steadfast Group go up and down completely randomly.

Pair Corralation between STRAYER EDUCATION and Steadfast Group

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to under-perform the Steadfast Group. In addition to that, STRAYER EDUCATION is 1.76 times more volatile than Steadfast Group Limited. It trades about -0.08 of its total potential returns per unit of risk. Steadfast Group Limited is currently generating about -0.02 per unit of volatility. If you would invest  337.00  in Steadfast Group Limited on December 25, 2024 and sell it today you would lose (9.00) from holding Steadfast Group Limited or give up 2.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

STRAYER EDUCATION  vs.  Steadfast Group Limited

STRAYER EDUCATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRAYER EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Steadfast Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steadfast Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Steadfast Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STRAYER EDUCATION and Steadfast Group

The main advantage of trading using opposite STRAYER EDUCATION and Steadfast Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STRAYER EDUCATION position performs unexpectedly, Steadfast Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Steadfast Group will offset losses from the drop in Steadfast Group's long position.

The idea behind STRAYER EDUCATION and Steadfast Group Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.